The Future of TATA Sons

TATA Sons Chairman: N Chandrasekaran

N Chandrasekaran, the chairman of Tata Sons in his third year at the conglomerate, is making all the efforts to restructure the company. Some of the changes which top the priority include the merging of 1000 subsidiaries of Tata Sons, the stabilization of loss, creating aviation and infrastructure projects, and registering as an E-commerce business with the Ministry of Corporate Affairs.

Merging of the 1000 Subsidiaries

N Chandrasekaran took over as the chairman of the $100 billion group on 21st February 2017. With various accomplishments in the past two years, he has a great vision for the future of TATA Group. He has worked endlessly in the previous two years for better functioning of the company. His efforts are clearly reflected in the profit margins of the December quarters of some subsidiaries. He is a firm believer of simplified business structures, and therefore aims to merge the companies with an objective of allocating the capital more efficiently. In 2018, he made a strategic exit from businesses facing loss by selling the consumer mobile business to Bharti Airtel Limited. This step was taken because the company was not able to make profits and had a little prospects of creating profits in the future.

According to some executives of the Tata Group, the company has already started the process of merging its subsidiaries, and the complete process will take around 12-18 months as a lot of approvals have to make their way through senior executives. This merging is being done to increase the operational efficiency of the companies. After the merging of subsidiaries, company is planning to reduce the number of operating companies owned by the group. Further, Tata sons is aiming to foster the infrastructure and financial service business.

The immediate plan is to classify the companies into 7-8 sectors instead of the current 100 operating companies. These groups will be made according the operational abilities of the companies. The Sectors are as follows: Tata Consultancy Services, Tata Motors, Tata Steel, Aerospace, Defense and Infrastructure and Financial Services.

Along with merging of its subsidiary companies, Tata has also planned to scale up its retail business. With the efficient functioning of its retail outlets like Titan, Westside, and Croma, Tata Group is thinking of revamping its Star Bazaar model. The group is further aiming to register themselves as an e-commerce unit at the Ministry of Corporate Affairs. The business model of this unit will be quite different than the ones in use at Flipkart and Amazon.

Jet and Tata Deal

Preliminary discussions of buyout of Jet Airways by Tata Sons began in November 2018. This deal can boost the company’s presence in the aviation sector. Although a specific proposal is not on the table yet, the discussions have resumed as the airline is soon going to hit bankruptcy. Jet Airways have reported a surge in liabilities, along with a quarterly loss. Etihad owns 24% stake in the Indian airline, and it has been discussing ways with SBI and other banks to keep it afloat.

ICRA, a credit rating agency, has given the company a D rating, as the airline defaulted on its interest and loan repayment. Though the company has been allotted a time span of 90 days to complete the payments, the rating D doesn’t portray a nice image in the market. Ultimately this will lead to a fall in the share value of Jet Airways. Currently, a forensic examination is being conducted into the books of the airline. Decisions will be made only post this assessment despite Tata Group , Jet Airways and Etihad having been in touch regarding the same.

The Way Forward

The Salt to Software Conglomerate is planning to enter two emerging sectors of smart mobility and smart cities. Tata Power Ltd. and Tata Motors will continue to make electric vehicles and equipments. The company is aiming to enter another important venture of smart cities by channelizing its resources and expertise across its sister companies. Tata Group is likely to try and duplicate the model of the Jamshedpur Township.